The major market indexes haven't hit six straight record intraday highs since 1987
Prior to today's round of profit-taking, the major market indexes were on a major hot streak, as stocks reacted to hawkish Fed chatter, President Donald Trump's hints of a new tax plan, and the latest round of earnings and economic data. In fact, the
Dow Jones Industrial Average (DJIA),
S&P 500 Index (SPX) and
Nasdaq Composite (COMP) all notched
record intraday highs in each of the last six sessions -- a feat so rare it's happened only one other time: two months before Black Monday.
According to Schaeffer's Senior Quantitative Analyst Rocky White, the only other time all three indexes hit six consecutive all-time highs was mid-August 1987, looking at data since 1972 (as far back as we have Nasdaq data). And while the sample size is small and should be taken with a grain of salt, it's worth noting that all three indexes were in the red one month after the '87 signal. Of course, the subsequent
three-month returns are skewed by Black Monday (Oct. 19, 1987), when the SPX fell over 20% in one day.
It's also worth noting that next week is Presidents Day, which tends to bode poorly for the SPX, and what we consider "weak breadth" often precedes weaker-than-usual SPX returns. And while we recommend not disturbing bullish positions, the massive short covering of late could point to a lack of fuel in the tank, as Schaeffer's Senior V.P. of Research Todd Salamone recently noted in Monday Morning Outlook. Against this backdrop, traders should consider the purchase of short-term in-the-money call options as a "stock replacement" strategy, allowing you to participate in a continued trend higher, while at the same time decreasing your dollars at risk.
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